-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UD7kx9rXxg9qM+2Q1MVZhWe9rr9y5evHgCmhy+TXaMssVusFQ8mTiXZYSNCAf4F2 8uS3/OqoIA6k6z8JDEJuNA== 0001019687-02-000368.txt : 20020415 0001019687-02-000368.hdr.sgml : 20020415 ACCESSION NUMBER: 0001019687-02-000368 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA BEACH RESTAURANTS INC CENTRAL INDEX KEY: 0000738274 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 952693503 STATE OF INCORPORATION: CA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12226 FILM NUMBER: 02576751 BUSINESS ADDRESS: STREET 1: 17383 SUNSET BLVD STE 140 CITY: PACIFIC PALISADES STATE: CA ZIP: 90272 BUSINESS PHONE: 3104599676 MAIL ADDRESS: STREET 1: 17351 SUNSET BLVD STE 404 STREET 2: 17351 SUNSET BLVD STE 404 CITY: PACIFIC PALISADES STATE: CA ZIP: 90272 FORMER COMPANY: FORMER CONFORMED NAME: IHV CORP DATE OF NAME CHANGE: 19900912 FORMER COMPANY: FORMER CONFORMED NAME: NATURAL ORGANICS INC DATE OF NAME CHANGE: 19860318 10-Q 1 calbeach_10q-013102.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2002 ---------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ------------------ Commission file number 0-12226 ------- CALIFORNIA BEACH RESTAURANTS, INC. ---------------------------------- (Exact name of Registrant as specified in its charter) CALIFORNIA 95-2693503 - ------------------------------- --------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 17383 Sunset Boulevard, Suite 140, Pacific Palisades, CA 90272 -------------------------------------------------------------- (Address and zip code of Principal executive offices) (310) 459-9676 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to the filing requirements for at least the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Number of Shares Outstanding Class at March 6, 2002 ----- ------------------ Common Stock, $.01 par value 3,400,926 - ---------------------------- ------------------ CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES JANUARY 31, 2002 INDEX
Part I - FINANCIAL INFORMATION Page Number ----------- Item 1. Financial Statements (Unaudited) -------------------------------- Consolidated Balance Sheets at January 31, 2002 and April 30, 2001..........................................................3 Consolidated Statements of Operations for the Three Months Ended and Nine Months Ended January 31, 2002 and 2001...................................................5 Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2002 and 2001.................................6 Notes to Consolidated Financial Statements..................................7 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations.........................................9 ----------------------------------- Item 3. Quantitative and Qualitative Disclosures about Market Risk.................13 ---------------------------------------------------------- Part II - OTHER INFORMATION Item 1. Legal Proceedings..........................................................13 ----------------- Item 2. Changes in Securities and Use of Proceeds..................................13 ----------------------------------------- Item 3. Defaults Upon Senior Securities............................................14 ------------------------------- Item 4. Submission of Matters to a Vote of Security Holders........................14 --------------------------------------------------- Item 5. Other Information..........................................................14 ----------------- Item 6. Exhibits and Reports on Form 8-K...........................................14 -------------------------------- Signature Page........................................................................15 2
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS January 31, 2002 April 30, 2001 ------------- ------------- (Unaudited) (1) Current Assets: Cash $ 232,000 $ 221,000 Trade and other receivables 97,000 42,000 Inventories 232,000 236,000 Prepaid expenses 189,000 269,000 ------------- ------------- Total current assets 750,000 759,000 Fixed Assets (at cost) - net of accumulated depreciation and amortization 2,485,000 2,797,000 Other assets 167,000 166,000 ------------- ------------- $ 3,402,000 $ 3,722,000 ============= ============= The accompanying notes to consolidated financial statements are an integral part of this statement. (1) The April 30, 2001 amounts have been extracted from the Company's Annual Report on Form 10-K for the year ended April 30, 2001. 3 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) January 31, 2002 April 30, 2001 ------------- ------------- (Unaudited) (1) Current Liabilities: Accounts payable $ 559,000 $ 666,000 Accrued liabilities 759,000 885,000 Notes Payable-Related Party 300,000 -- Current portion of note payable 222,000 207,000 Revolving Line of credit 262,000 63,000 ------------- ------------- Total current liabilities 2,102,000 1,821,000 Note payable, less current portion 424,000 585,000 Subordinated convertible notes 1,890,000 1,890,000 Deferred rent 344,000 361,000 Other liabilities -- 9,000 Stockholders' (Deficit): Common stock, $.01 par value, authorized 25,000,000 shares, issued and outstanding, 3,401,000 shares at January 31, 2002 and at April 30, 2001 34,000 34,000 Additional paid-in capital 13,175,000 13,175,000 Accumulated deficit (14,567,000) (14,153,000) ------------- ------------- Total stockholders' (deficit) (1,358,000) (944,000) ------------- ------------- $ 3,402,000 $ 3,722,000 ============= ============= The accompanying notes to consolidated financial statements are an integral part of this statement. (1) The April 30, 2001 amounts have been extracted from the Company's Annual Report on Form 10-K for the year ended April 30, 2001. 4 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended January 31, January 31, ----------------------------- ----------------------------- 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Sales $ 2,836,000 $ 3,346,000 $ 9,999,000 $ 10,960,000 Costs and expenses: Cost of goods sold 3,027,000 3,272,000 9,291,000 9,654,000 Selling, general and administrative 247,000 272,000 657,000 804,000 Depreciation 138,000 137,000 346,000 326,000 Amortization of intangible assets 2,000 1,000 4,000 3,000 ------------- ------------- ------------- ------------- (578,000) (336,000) (299,000) 173,000 Other expenses: Interest expense (30,000) (49,000) (120,000) (152,000) Income (loss) before income taxes (608,000) (385,000) (419,000) 21,000 Benefit (provision) for income taxes 6,000 (1,000) 5,000 (3,000) ------------- ------------- ------------- ------------- Net Income (loss) ($ 602,000) ($ 386,000) ($ 414,000) $ 18,000 ============= ============= ============= ============= Net Income (loss) per common share: Basic ($ .18) ($ .11) ($ .12) $ .01 ============= ============= ============= ============= Diluted ($ .18) ($ .11) ($ .12) $ .00 ============= ============= ============= ============= Weighted average number of common shares outstanding: Basic 3,401,000 3,401,000 3,401,000 3,401,000 ============= ============= ============= ============= Diluted 3,401,000 3,401,000 3,401,000 5,291,000 ============= ============= ============= ============= The accompanying notes to consolidated financial statements are an integral part of this statement. 5
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JANUARY 31, (UNAUDITED) 2002 2001 ---------- ---------- Cash flows from operating activities: Net Income (loss) ($414,000) $ 18,000 Adjustments to reconcile net income (loss) to cash provided by (used in) operations: Depreciation and amortization 350,000 329,000 Changes in operating assets and liabilities: Trade and other receivables (55,000) 32,000 Inventories -- 5,000 Prepaid expenses 76,000 (17,000) Other assets (4,000) 3,000 Accounts payable (107,000) (288,000) Accrued liabilities (126,000) 267,000 Deferred rent (17,000) (17,000) Other liabilities (9,000) (56,000) ---------- ---------- Cash provided by (used in) operations (307,000) 276,000 ---------- ---------- Investing activities: Additions to fixed assets (35,000) (97,000) ---------- ---------- Net cash used in investing activities (35,000) (97,000) ---------- ---------- Financing activities: Borrowings 499,000 -- Principal payments on borrowings (146,000) (251,000) ---------- ---------- Net cash provided by (used in) financing activities 353,000 (251,000) ---------- ---------- Net (decrease) increase in cash 11,000 (72,000) Cash at beginning of period 221,000 102,000 ---------- ---------- Cash at end of period $ 232,000 $ 30,000 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 120,000 $ 78,000 ========== ========== Income taxes $ -- $ -- ========== ========== The accompanying notes to consolidated financial statements are an integral part of this statement 6 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION The unaudited consolidated financial statements presented herein include the accounts of California Beach Restaurants, Inc., and its wholly-owned subsidiaries (the "Company" or "Registrant"). All significant intercompany accounts and transactions have been eliminated. The unaudited consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States and the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Company's financial position and results of operations. The results of operations for the three and nine month periods ended January 31, 2002 may not be indicative of the results that may be expected for the year ending April 30, 2002. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year-ended April 30, 2001. ACCOUNTING PERIODS The Company's restaurant operations are conducted through its wholly-owned subsidiary, Sea View Restaurants, Inc. ("Sea View"). The Company's consolidated financial statements for the three months and nine months ended, for each of January 31, 2002 and 2001 include Sea View's operations for the sixteen weeks and forty weeks ended, for each of February 7, 2002 and February 1, 2001, respectively. FIXED ASSETS January 31, 2002 April 30, 2001 -------------- -------------- Leasehold improvements $ 4,676,000 $ 4,664,000 Furniture and equipment 2,163,000 2,140,000 -------------- -------------- 6,839,000 6,804,000 Less accumulated depreciation and amortization (4,354,000) (4,007,000) -------------- -------------- $ 2,485,000 $ 2,797,000 ============== ============== EARNINGS PER SHARE Subordinated convertible notes are convertible into common stock at a rate of $1 per share and thus have potential for dilution on earnings. However because of the net loss in both three months ended January 31, 2002 and 2001 and nine months ended January 31, 2002 these notes had an anti-dilutive effect. 7 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) LINE OF CREDIT On June 22, 2001, the Registrant entered into an amendment to extend, $500,000 revolving line of credit agreement with US Bank through September 15, 2002. The agreement provides for interest at prime plus 1% on all amounts borrowed, requires a commitment fee of 1/2% on all unborrowed amounts, and is secured by certain assets of the Registrant, including its license agreement with MCA for use of the name Gladstone's. It is also guaranteed by Sea View. The agreement requires the Registrant to comply with certain cash flow and liquidity covenants, and includes a 60 consecutive days out of debt requirement. The Registrant did not meet certain covenant requirements for the quarter ended January 31, 2002, and a waiver was obtained from the bank. The Registrant utilized $437,500 of the capacity of the revolving line of credit as collateral support for a letter of credit issued by US Bank pursuant to the Concession Agreement. The letter of credit expires on September 15, 2002. This agreement also provides a temporary increase in the terms of the revolving line of credit agreement to provide for a $200,000 increase in the maximum amount of the line of credit from $500,000 to $700,000. The additional $200,000 of available borrowing capacity will be available to the Registrant during the period December 1, 2001 through April 30, 2002 only, after which the line of credit will revert to its original $500,000 borrowing limit. The Registrant issued two promissory notes for $300,000 to RLH Surf, an entity affiliated with one of the Registrant's principal stockholders and with a member of its board of directors for period ended January 31, 2002. This agreement provided for an interest rate of 15% per annum. The Registrant will pay interest in cash on March 2, May 31, August 31, and November 30 of each year for the quarters ending the immediately preceding January 31, April 30, July 31,and October 31 respectively. The principal amount of this note will mature on September 30, 2002. The principal and interest payment on this note are junior and subordinate, in all aspects, to the prior payment in full of Senior Debt of the Registrant. 8 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS RESTAURANT REVENUES - ------------------- Restaurant operations include the results of Gladstone's 4 Fish ("Gladstone's") in Pacific Palisades, California and RJ's - Beverly Hills in Beverly Hills, California. Total sales for the three months ended January 31, 2002 were $2,836,000 compared with $3,346,000 for the same period last year, a decrease of $510,000 or 15.2%. For the nine months ended January 31, 2002, total sales were $9,999,000 compared with $10,960,000 for the same period last year, a decrease of $961,000 or 8.8%.Total number of customers for the three months ended January 31, 2002, were 133,048 compared with 139,608 for the same period last year, a decrease of 6,560 or 4.7%. For the nine months ended January 31, 2002, total number of customers were 414,567 compared with 463,610 for the same period last year, a decrease of 49,043 or 10.6%. The Registrant believes that the decrease in sales at Gladstone's for the three months and nine months ended January 31, 2002 as compared to the comparable period in the prior year is due to the September 11, 2001 tragedy and resulting decline in travel and tourism, combined with the mild recession of 2001. COST OF GOODS SOLD - ------------------ Cost of goods sold includes all food, beverages, liquor, direct labor and other operating expenses, including rent, of the Registrant's restaurant operations. Cost of goods sold for the three months ended January 31, 2002 was $3,027,000 or 106.7%, as a percentage of sales, compared with $3,272,000 or 97.8%, as a percentage of sales, during the same period last year. The change is a result of the decrease in sales volume and the increase in fixed costs (rent, utilities, taxes, and insurances) as a percentage of sales and dollars. Cost of goods sold for the nine months ended January 31, 2002 was $9,291,000 or 92.9%, as a percentage of sales, compared with $9,654,000, or 88.1%, as a percentage of sales, during the same period last year. The change is a result of the decrease in sales volume and the increase in fixed costs (rent, utilities, taxes, and insurances) as a percentage of sales and dollars. 9 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - -------------------------------------------- For the three months ended January 31, 2002, selling, general and administrative expenses were $247,000 compared with $272,000 for the same period in the prior year, a decrease of $25,000, or 9.2%. The elimination of payroll coordinator as a separate position and reduction in the CEO's salary compensation are the primary cause of the decrease. For the nine months ended January 31, 2002, selling, general and administrative expenses were $657,000 compared with $804,000 for the comparable period in the previous year, a decrease of $147,000, or 18.3%.The decrease in litigation costs along with reduction in payroll for CEO, and elimination of payroll coordinator as a separate position are primary reason for this reduction. DEPRECIATION AND AMORTIZATION OF INTANGIBLE ASSETS - ---------------------------------------------- For the three months and nine months ended January 31, 2002, depreciation expense was $138,000 and $346,000, respectively, compared with $137,000 and $326,000, respectively, for the same periods last year. 10 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- On March 30, 1999, the Registrant completed a private offering of $1,800,000 of subordinated, convertible notes ("Subordinated Notes") to a limited number of existing shareholders of the Registrant who are "accredited investors" within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended. The proceeds of the offering were used to retire existing indebtedness to Outside LLC, an entity affiliated with the Registrant, and to finance the renovations at Gladstone's. The Subordinated Notes are immediately convertible into common stock of the Registrant at a rate of $1 per share, and pay interest at 5% per annum. The Registrant may pay interest on the Subordinated Notes in cash or in kind. The Subordinated Notes mature on March 30, 2003; as of this time the nature of this note is long term and the Registrant intends to convert the principal and any unpaid interest into common stock. The Registrant has entered into an agreement for tenant improvement and equipment financing with Lyon Credit Corporation ("TI Facility"). The terms of the agreement provide for the extension of up to $1,089,000 of credit, to be repaid over a 5 year period with interest at the rate of the yield to maturity of the five year Treasury Note plus 4 percent (9.94% at January 31, 2002). This financing is secured by certain tenant improvements and equipment. At January 31, 2002, the balance due under the TI Facility was $646,000 of which $424,000 is long term and $222,000 is short term debt. On June 22, 2001, the Registrant entered into an amendment to extend its $500,000 revolving line of credit agreement with US Bank ("Line of Credit") through September 15, 2002. This agreement provides for interest at prime plus 1% on all amounts borrowed, requires a commitment fee of 1/2%on all unborrowed amounts, and is secured by certain assets of the Registrant, including its license agreement with MCA for use of the name Gladstone's. It is also guaranteed by Sea View. The agreement requires the Registrant to comply with certain cash flow and liquidity covenants, and includes a 60 consecutive days out of debt requirement. The Registrant utilized $437,500 of the capacity of the revolving line of credit as collateral support for a letter of credit issued by US Bank pursuant to the Concession Agreement. The letter of credit expires on September 15, 2002 and requires a commitment fee of 1%. This agreement also provides a temporary bulge in the terms of the revolving line of credit agreement to provide for a $200,000 increase in the maximum amount of the line of credit from $500,000 to $700,000. The additional $200,000 of available borrowing capacity will be available to the Registrant during the period December 1, 2001 through April 30,2002 only, after which the line of credit will revert to its original $500,000 borrowing limit. All of this line of credit is considered short term debt. At January 31, 2002, the balance due under the Line of Credit was $262,500. The Registrant issued two promissory notes for $300,000 to RLH Surf, an entity affiliated with one of the Registrant's principal stockholders and with a member of its board of directors for period ended January 31, 2002. This agreement provided for an interest rate of 15% per annum. The Registrant will pay interest in cash on March 2, May 31, August 31, and November 30 of each year for the quarters ending the immediately preceding January 31, April 30, July 31,and October 31 respectively. The principal amount of this note will mature on September 30, 2002. The principal and interest payment on this note are junior and subordinate, in all aspects, to the prior payment in full of Senior Debt of the Registrant. The Registrant is exploring various opportunities to expand its operations. The Registrant's ability to expand is subject to the availability of debt or equity financing on terms that are acceptable to the Registrant. There can be no assurance that such financing will be available. The Registrant believes it will have sufficient funds form operations and borrowings to meet its anticipated requirements for working capital and capital expenditures during the next twelve months. 11 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS Except for the historical information contained herein, certain statements in this Form 10-Q, including statements in this Item are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of the Registrant, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the Registrant's ability to secure adequate debt or equity financing in order to comply with the terms of the Gladstone's Concession Agreement, including the maintenance of a letter of credit, the Registrant's ability to generate an operating profit based on the terms of the Gladstone's Concession Agreement;; that its principal source of cash is funds generated from operations; that restaurants historically have represented a high risk investment in a very competitive industry; general and local economic conditions, which can, among other things, impact tourism, consumer spending and restaurant revenues; weather and natural disasters, such as earthquakes and fires, which can impact sales at the Registrant's restaurants; quality of management; changes in, or the failure to comply with, governmental regulations; unexpected increases in the cost of key food products, labor and other operating expenses in connection with the Registrant's business; and other factors referenced in this Form 10-Q and the Registrant's other filings with the Securities and Exchange Commission. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable as the Registrant is a small business issuer as defined by SEC regulations. PART II OTHER INFORMATION ----------------- Item 1. Legal Proceedings. ------------------ The Registrant is subject to normal and routine litigation. The amount of liability from the claims and actions against the Company cannot be determined with certainty, but in the opinion of management, the ultimate liability from all pending legal proceedings should not materially affect the results of operations and liquidity of the Company. Item 2. Changes in Securities and Use of Proceeds. ----------------------------------------- None 13 Item 3. Defaults Upon Senior Securities. ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- Not applicable. Item 5. Other Information ----------------- Not applicable. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Reports on Form 8-K ------------------- None 14 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES Signature(s) ------------ Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has caused this report to be signed on its behalf by the undersigned thereunto authorized. California Beach Restaurants, Inc. (Registrant) Dated: March 15, 2002 By: /s/ Alan Redhead ------------------------------------------- Alan Redhead Chief Executive Officer Chief Financial Officer 15 CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Item Number Description - ------ ----------- None 16 -----END PRIVACY-ENHANCED MESSAGE-----